Dairy Revenue Protection (DRP)

---

Dairy Revenue Protection is an area-based revenue product that is designed to insure against unexpected declines in the quarterly revenue from milk sales relative to a guaranteed coverage level. The quarterly insurance periods cover a three-month period and can be sold up to five quarters, with the exception of the last sales period.

There are two pricing options available for each endorsement. The expected revenue is based on futures prices for milk and dairy commodities and the amount of covered milk production elected by the dairy producer. The covered milk production is indexed to the state or region where the dairy producer is located.

The final revenue guarantee is based on expected yield multiplied by expected price (also protection factor and share) along with the coverage level selected.

Expected milk yields are based on state-level National Agricultural Statistics Services (NASS) estimates of milk production per cow in the state or pooled production region.

At the end of the insured quarter, if actual milk revenue is below the revenue guarantee, the insured will receive an indemnity payment for the difference between the actual milk revenue multiplied times the share and protection factor. Dairy Revenue Protection is area-based coverage.

Livestock Gross Margin (LGM)

---

LGM-Dairy is another opportunity for dairy producers to mitigate risk, especially during challenging economic times. It provides margin protection in your dairy operation. Gross margin is the market value of milk minus the cost of feed, and LGM-Dairy can protect your ag operation when feed costs rise or milk prices drop. 

LGM-Dairy is available to any producer who owns dairy cattle in the 48 contiguous states and can be customized to any size.

The 2018 Farm Bill provisions allow for dairy operations to participate in both LGM-Dairy and Farm Service Agency’s Dairy Margin Coverage (DMC) program.